Companies want stent cap based on hospital price for big profits

The price to hospital could range from Rs 23,000 to Rs 60,000 or from Rs 65,000 to Rs 1 lakh for the same stent brand. The stent industry wants the price at which a stent is sold to the hospital as the basis for price fixing with hospitals deemed retailers.

A calculation based on price to hospital gives a ceiling price which is 200% more than that fixed on the basis of import price or the price under government health insurance.

With the stent industry, which has an interest in getting the maximum ceiling price, providing the hospital price to the National Pharmaceutical Pricing Authority, the authenticity of the prices they submit are being questioned.

The price to hospital could range from Rs 23,000 to Rs 60,000 or from Rs 65,000 to Rs 1 lakh for the same stent brand. The same could be sold to patients for anything from Rs 35,000 to Rs 1.5 lakh in private hospitals.

A ceiling price would ensure a uniform price for the country above which no patient would have to pay.

The NPPA on Friday made public the possible ceiling prices for stents depending on what formulae is used to calculate it.

Understandably, the NPPA's calculation of the average prices of drug eluting stents (DES) to hospitals using industry-submitted data gives the highest ceiling price of over Rs 67,000, which includes the 16% margin to the retailer, in this case the hospital. Such a high ceiling price could be because of the prices the companies submitted as the price to hospital.

The ceiling price when calculated using price to distributor is about Rs 40,000, including 16% margin for the distributor. If an average of the import price of DES is considered the ceiling price would be less than Rs 22,000 even with a 35% margin.

The lowest ceiling price would be the CGHS price of Rs 22,500 which with taxes added is Rs 23,625. Obviously, the companies are resisting calculation based on these formulae as that would lead to a lower ceiling price.

While a hospital might have a bill showing it paid Rs 80,000 for a stent, in reality the hospital pays the distributor only the agreed price of Rs 50,000. This is made possible through the system of credit notes.

The distributor gives a credit note of Rs 30,000 to the hospital for the remaining amount. The hospital then sells it to the patient with 15% handling charge added making the final price approximately Rs 92,000. Thus the hospital makes a profit of Rs 30,000+ Rs 12,000, i.e. Rs 42,000.

“We should not forget that affordability is the touchstone in the exercise of price fixing. The government must not fix a price based on a methodology that is faulty and legitimises the exorbitant prices charged to patients. It should work towards protecting the right to health and putting an end to the exploitative practices in which the industry, hospitals and doctors are complicit,“ said Malini Aisola of All India Drug Action Network.

Association of Healthcare Providers of India (APHI) has protested against hospitals being categorised as retailers. “We are not reselling the stents. It is a consumable which is part of a procedure,“ defended Dr Girdhar Gyani of AHPI. He added that hospitals were in favour capping the price of stents to bring down the cost of the whole package, but wanted government to ensure quality of stents.

The NPPA calculations do not have any formulae based on cost of production though that was also one of the options being considered earlier.

“The maximum retail price was so highly inflated for most stents that its average would not give much benefit to the consumers and so it was decided not to use it. But there is consensus on price to hospital,“ said Rajiv Nath of Association of Indian Medical Device Industry. Other industry associations did not respond to queries regarding formulae for price fixation.

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